Allen Pike 2016-10-01T02:07:07-07:00 Allen Pike Socking simians 2016-09-30T22:00:00-07:00 Allen Pike <p>For years, app developers and users alike have struggled with the App Store’s search. Quality apps <a href="">have often been outranked</a> by profitable garbage. Now, thanks to Search Ads, this highly visible shovelware can finally be outranked by the developers that truly matter: the highest bidders.</p> <p>Online ads have long been dominated by bidding systems, which allow advertisers to dictate exactly how much they’re willing to pay for a user to click, tap, or otherwise palpate their ad. The key advantage to the auction approach is that it tends to show the most profitable ads. The key disadvantage, however, is that it tends to show the most profitable ads.</p> <p><a href=""><img style='max-width: 100%' src="/images/2016/punch-monkey.jpg" /></a></p> <p>In many contexts, the most profitable ads are the flashiest, the most distracting, and the most deceptive. Whether it’s <a href="">some guy</a> bragging about his <a href="">Lamborghini account</a> or a banner ad imploring you sock a simian, there has always been a category of ad that tries to suck in eyeballs using a finely-tuned blend of weirdness and deceit.</p> <p>Thankfully, App Store Search Ads are static and will likely be policed. As such, the ads we see on the App Store will typically be profitable not because they’re annoying, but because the apps they promote make a lot of money. More precisely, since App Store Search Ads charge the advertiser when a user taps on the ad, the ads that will win will be for apps that make a lot of money <em>per App Store product page view</em>.</p> <h2 id="ad-fuel-to-the-fire">Ad fuel to the fire</h2> <p>Thanks to Apple’s App Analytics, I know that about 10% of views for our <a href="">WeddingDJ App Store page</a> result in a purchase. I know that a lot of pages online convert at 1% or less, so this seems decent for a $8 app. We make $5.60 after Apple’s cut, so using an advanced field of math known as multiplication, we can determine that a WeddingDJ App Store view is worth no more than 56 cents. Worse, that metric is inflated by visitors that are explicitly looking to buy our app, so the value of a view coming from a wandering soul just browsing the store is perhaps 40 cents or less.</p> <p>As such, when Search Ads launch on Wednesday, we’ll have an experimental ad running in the App Store for a few wedding-related keywords, with a maximum bid of only 30 cents per tap. Based on my previous experience with ads on Google, Facebook, and elsewhere, I expect two things to happen:</p> <ol> <li>Our bid will turn out to be too high to be profitable for us, <em>and</em></li> <li>Our bid will turn out to be too low to be profitable for Apple</li> </ol> <p>I’m always open to trying new things, but mathematics is not, and the math is seriously stacked against anybody trying to profit from ads at $8 per sale.</p> <h2 id="this-episode-is-brought-to-you-by-profit">This episode is brought to you by profit</h2> <p>Think about some software ads you’ve seen or heard recently. Likely, those ads are for software that generates a lot of revenue per user. Likely, that software is priced with a subscription. Advertising studs like Squarespace, Backblaze, and Hover all drive subscriptions. Subscriptions are jet fuel for what spreadsheet addicts call Lifetime Value, or LTV.</p> <p>Now, it’s intuitive that subscriptions increase the average revenue per user – that’s just common sense. But if your renewal rate is good, the effect exceeds our intuition. Let’s take <a href="">Backblaze</a> for example. This simple backup service is famously “only $5” a month. Assuming they have a 90% yearly renewal rate, one signup would bring in $600. If you can drive such a signup for only $100, you’re doing great – you’ve found a way to turn money into a bunch more money.</p> <p>Meanwhile, the poor schmoes charging just $10 for an app can only justify ads if they can motivate a purchase for under $3 per sale. At today’s ad rates, you can barely drive an install of a <em>free</em> app for $3, let alone convince some cash-strapped millennial to cough up $10.</p> <p>Of course, a naïve auction system would reduce the price of a keyword until it becomes profitable – at least once the dumb VC money takes its turn. This could mean that some App Store ads actually do run for 40 cents, 10 cents, or as cheap as they need to be for developers to make a profit. Unfortunately for those of us that sell products with low LTV, there is a threshold where it’s not worth it for the ad network to show your ad at all, and typically 40 cents won’t cut it.</p> <p>Showing ads, you see, comes at the cost of slowly training viewers to tune them out. Given this, we see veterans like Google presenting no ads at all for most queries. If a search term doesn’t drive demand for highly priced legitimate ads, no ads will appear. Meanwhile, profitable keywords, which Google refers to as “highly commercial queries”, often have an entire screen full of ads before the first organic result.</p> <p><img style='max-width: 100%' src="/images/2016/google-ads.png" /></p> <p>Most search terms that indie app developers would be interested in will probably fall into the “not profitable” category. If Apple is willing to show our ads for a few cents each while the system learns, then there’s no harm in putting them up, but that train won’t last long.</p> <p>In the long term, Search Ads are just yet another argument for charging serious, sustainable money for your software. Whether you’re looking at the <a href="">new options for in-app subscriptions</a>, providing <a href="">a fully fledged cloud service</a>, or taking Omni’s lead in <a href="">making use of App Store changes that allow a form of trials and upgrade pricing</a>, the first step is shipping something that makes serious revenue per user.</p> <p>Then, and only then, will it be worth asking them to punch a monkey.</p> Creative destruction 2016-08-31T22:00:00-07:00 Allen Pike <p>Yesterday, Brent Simmons <a href="">shut down Vesper</a>. It was hard for Brent and the team at Q Branch. Endings are often sad, but ending a software product stings in a unique way.</p> <p>Software is deeply impermanent. While it is often built painstakingly and methodically, it is experienced ephemerally, in the moment. Apps are hard to preserve for study or posterity. Network-backed apps, doubly so.</p> <p>Worse, software only stays alive with diligent maintenance. Left alone, the wheel of technological change soon breaks the assumptions underlying the code. This kills the crab.</p> <p>It can be deeply unsettling – our best work is cyclically swept away. On the other hand, it’s why software is such a wonderful and exciting field – everything is always new.</p> <p><a href=""><img style='max-width: 100%' src="/images/2016/classics-iphone.png" style="float: right; width: 150px" /></a></p> <p>The early days of the App Store were all about polished new apps on a polished new platform. While web developers have long thrown up experiments and demos to gather feedback and gauge interest, the App Store took a different tack:</p> <blockquote> <p>Demos, betas, and trial versions of your app don’t belong on the App Store.</p> </blockquote> <p>iOS was about finished software, and the attention, novelty, and profits that might follow. While traditional paths to sustainability like upgrades or subscriptions were missing, the hit-driven nature of paid apps and top charts meant that the focus was squarely on a great launch.</p> <p>Thus for many, the process looked like so:</p> <ol> <li>Evaluate a bunch of app ideas, and pick the best one.</li> <li>Prototype it and demo it.</li> <li>Iterate it and beta test it.</li> <li>Polish until proud of the resulting gem.</li> <li>Release it to the world, hopefully with great fanfare.</li> <li>Perhaps see outsized success, but more likely find that the revenue just wasn’t sustainable.</li> <li>GOTO 1.</li> </ol> <p>At Steamclock, we repeated these steps a few times. We did manage to disprove a couple ideas with quick prototypes, but once we got excited about a project, it would take on a life of its own. Our love of the craft would kick in, and we’d be driven to share it with the world. As much as we love shipping polished software though, it’s a shockingly <a href="">expensive way to test whether or not people will pay for something</a>.</p> <h2 id="duh">Duh</h2> <p>This is, of course, common sense and well known in our industry. You need to be shelving a certain percentage of product ideas at each step in their evolution, rather than just at the idea stage or far later when they’ve proved wildly unprofitable. Sometimes, I suppose, an obvious lesson needs to be beaten into one’s skull.</p> <p>So, more recently, we’ve been attempting more ideas but shipping fewer attempts. Less wood behind more arrows. In the time it takes to polish and ship one app, we can do prototyping and market research on a dozen. Since we retired Prism, we’ve prototyped a Meetup competitor, an Apple Music app, an iMessage app, a <a href="">podcast recording service</a>, an Android music app, an <a href="">invoicing system</a>, and even a strategy game. We’ve had fun and learned a lot.</p> <p>Now, most of those prototypes will never turn into a profitable product, but I suspect one of them will. Killing the others isn’t fun, but you’ve got to know when to fold ‘em. That’s what makes the difference between toiling for too long on something not enough people will pay for, and having the bandwidth to ship something new that changes the world.</p> <p>Or, at least, keeps the lights on.</p> New Here 2016-07-31T22:00:00-07:00 Allen Pike <p>On July 11, we welcomed Elizabeth Pike into our family. She weighed only 4.6 lbs, most of which was cheek. She was rather early and very small, so we spent our first week with her in the hospital, where she fuelled up on the world’s tiniest IV.</p> <p><img style='max-width: 100%' src="/images/2016/ellie-iv.jpg" /></p> <p>Over that first week she graduated to the world’s tiniest feeding tube, then to feeding all on her own. By day 6, she could eat an entire 37 millilitres at once! I was rather proud of that. Admittedly, her accomplishment was drinking less than a shot glass worth of tepid milk. Still, those moments, those celebrations of tiny things, they knit your heart in love very quickly. The tiny firsts of a tiny life.</p> <p>While I say that Ellie is tiny, most people haven’t met a baby that is quite so small. By her second day, she was down to 4.3 pounds. While such a weight isn’t incredibly rare, babies her size don’t exactly crawl down the street every day. As such, it can be difficult to put her smallness into context for friends and family. 4.3 lbs is less than a two litre carton of milk. She’s too small for any baby carrier or “convertible” car seat. Newborn diapers are huge on her, which is not exactly a desirable attribute in diapers. Preemie sized diapers exist, but are difficult to find on short notice, which is also not a desirable attribute in diapers.</p> <p>So, Ellie is pretty small. (Banana for scale.)</p> <p><img style='max-width: 100%' src="/images/2016/ellie-banana.jpg" /></p> <p>While being so thin and light makes Ellie the most pocketable Pike yet, it dramatically limits her battery life. Her desire to sleep for hours uninterrupted is mostly delightful, but with a stomach smaller than an egg, it means she runs out of food to digest before she wakes. As such, in order to keep her growing, we’ve been instructed to wake her and feed her every 3 hours, day and night.</p> <p>Since she’s not yet strong enough to breastfeed for the entire feed, this feeding ritual takes 1 to 2 hours. We change, breastfeed, burp, bottle feed, pump, clean, burp, and – often – change again. Once that’s done, we can put her down for an hour before the wheel rolls ‘round again. Where the week was once broken into 24 hour cycles, it is now made of 3 hour cycles.</p> <p>Raising a baby, I’ve found, makes one more aware of time. In addition to feeding time 8-10 times a day, babies also need bath time, tummy time, bare-butt time, skin-to-skin time, vitamin-d-drop time, and a variety of other times as per the instruction manual that comes with every baby. While these rituals can be quite satisfying, they add up to rather a lot of time.</p> <p>New parents often ask rhetorically, “What did I do with all my time before the baby came?” While reallocation of time would be a simple explanation for all this newfound time, my sense has been that having a baby has <em>created</em> time. I have observed, since her arrival, entirely new hours in the day. This “time dilation” effect seems to occur after the end of each day, before the start of the next. I previously had not perceived these hours, but it turns out they can be used for a range of activities, as long as those activities involve putting milk into a baby.</p> <p>And perhaps, on occasion – when everybody else is sleeping – a bit of writing.</p>